Article 11 of the Saudi Commercial Court Law
المادة 11 من النظام التجاري نظام المحكمة التجارية · الفصل الثاني: في الشركات
The article defines a company as a contract between two or more people to make a lawful profit, and divides companies into mufawada, inan and mudaraba.
Official text (Arabic)
This article has not been amended since the law was issued.
الشركة عقد بين اثنين فأكثر يلتزم به تصرف مخصوص لتحصيل ربح مشروع؛ وهي ثلاثة أنواع: شركة المفاوضة ، وشركة العنان ، وشركة المضاربة .
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 11 explained in plain English
This article defines the company as a contract between two or more people by which a specific act is undertaken to obtain a lawful profit. The definition shows that a company has basic elements:
- A contract: a company arises by agreement, and does not arise from the will of one person.
- Plurality: there must be two or more persons.
- The purpose: obtaining a profit, which must be lawful.
The article then divides companies into three types:
- The mufawada company, which Article 12 explained is the one referred to as the general partnership (tadamun), in which the partners are jointly and severally liable for the undertakings signed by the authorized partners.
- The inan company.
- The mudaraba company.
The definition makes the lawfulness of the profit a condition of the company, so an agreement to obtain an unlawful profit does not fit this description. The following articles of the law define each type separately. If you intend to enter a commercial partnership and need to choose the suitable form and draft the contract, consult a lawyer who specializes in companies and commercial cases.
Practical example
Fahd and Majed agree to pool their money to open a restaurant in Riyadh and share the profits. This agreement is a contract between two people to obtain a lawful profit, so it fits the definition of a company in this article, and they still have to decide its type.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 11 of the Saudi Commercial Court Law
What is the definition of a company in the Commercial Court Law?
It is a contract between two or more people by which a specific act is undertaken to obtain a lawful profit.
What types of companies does the article mention?
Three types: the mufawada company, the inan company and the mudaraba company.
Can a company consist of one person under this article?
The article's definition requires the contract to be between two or more people.
More articles on Companies Under the Commercial Law
- Article 12
The article defines the mufawada (general partnership) company as one with known equal capital, in which partners are jointly and severally liable for the company's undertakings.
شركة المفاوضة المعبر عنها بشركة التضامن هي الشركة المنعقدة تحت إمضاء عموم الشركاء على رأس مال معلوم متساو ويكون جميع الشركاء متضامنين متكافلين في كل التعهدات وا
- Article 13
The article defines the inan company as one with known capital in which each partner has a specific share, and no partner bears a loss beyond his share.
شركة العنان هي الشركة المنعقدة بين اثنين فأكثر على رأس مال معلوم لكل من الشركاء حصة معينة فيه ولا يتحمل الشريك ضررا ولا خسارة زيادة على حصته من رأس المال.
- Article 14
The article defines the joint-stock company as a branch of the inan company whose capital is divided into shares and which is managed by chosen agents who are not personally liable for its undertakings.
من فروع شركة العنان المساهمة وهي الشركة المنعقدة على رأس مال معلوم يقسم إلى أسهم، والأسهم إلى حصص متساوية المبالغ من غير تسمية أصحاب الحصص، ويتولى إدارتها وكلاء
- Article 15
The article defines the mudaraba company as one in which one party provides the capital and the other the work, and all share in the profit.
شركة المضاربة هي الشركة المنعقدة على أن يكون رأس المال من طرف والعمل من الطرف الآخر لاشتراك الجميع في الربح الحاصل.
- Article 16
The article provides that there are other partnerships customary among merchants that are not listed, and their customary requirements apply to them.
ما عدا الشركات المذكورة آنفا توجد شركات أخرى متعارفة بين التجارة تجري فيها مقتضياتها.
- Article 17
The article provides that the profits of all partnerships are divided among the partners in the manner they agreed.
كل الشركات تقسم أرباحها على الوجه الذي وقع الاتفاق عليه وبين الشركاء.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.